Ministry of Mining

Handover notes

By: Hon. Najib Balala EGH; the Outgoing Cabinet Secretary,

To: Hon. Dan Kazungu; Incoming Cabinet Secretary,

February, 2016

A. OVERVIEW
The Ministry is charged with the responsibility of promoting sustainable
exploitation of Kenyas Mineral resources. To achieve this goal the Ministry is
structured into Directorates with the following mandates;
i) Directorate of Geological Surveys;
ii) Directorate of Mines;
iii) Directorate of Resource Surveys and Remote Sensing;
iv) Directorate of Mineral Promotion and Value Addition; and
v) Directorate of Corporate Affairs.
The core mandate of the Ministry is:
i)

To coordinate mineral exploration, development and management;

ii)

To compile inventory and undertake mapping of Mineral Resources;

iii)

To coordinate Mining and Minerals Development;

iv) To develop Policies on the Management of quarrying and Mining of

rocks and industrial minerals such as Limestone, Building stones, Clay,
Gemstone, Cement, Coal etc;
v)

To develop policy around extractive industry including policy on

industry skills and supply chain;

vi) To undertake Management of health conditions and health and

safety in mines;
vii) To conduct Resource Surveys and Remote Sensing; and
viii) To maintain geological data (research/data collection, collation and
analysis).

B. SECTOR PERFORMANCE
Kenya is still in early exploration stages of its mineral potential. Initially, the
country was mapped as an agricultural zone and in previous generations,
this led to reduced exploration for minerals.

The country is vastly underexplored thus the mining sector is dominated by

the production of non-metallic commodities. Kenya is the third largest
producer of soda ash in the world and the seventh producer of fluorspar.
Metallic minerals currently produced include titanium, gold and iron ore.
Export statistics for Kenya indicate a constantly growing sector. In February
2014, for instance, Kenya exported 25,000 tons of titanium ore but it is
expected that with increased development, the country could contribute
substantially to annual global supply. With further exploration and uptake
of mineral rights then, it is estimated that Kenya will have the capacity to
position itself as a regional mining sector hub for Eastern Africa. Kenya also
recently made announcements of having world class deposits of rare
earth elements in the coastal region of the country.
The recent discoveries are estimated to be worth USD 62.4B and will propel
Kenya to the list of top five countries with rare earth deposits in the world.
In addition, the country has the worlds top six deposits for Niobium.
Commercial deposits of coal have been discovered in the north eastern
region of the country and are currently under review for potential uses
and production.

Key Players in Kenyass Mining Sector

A number of global mining companies have operations in Kenya. Of note
include Tata Chemicals Magadi which has its operation in the Lake
Magadi region in the Great Rift Valley and is Africas largest soda ash
producer and one of Kenyas leading exporters. Kenya Fluorspar
Company Limited has been mining fluorspar for export in the Rift Valley
System since 1971. The second largest mineral income earner for Kenya,
the Company has an estimated production of 360,000 tons of ore mined
annually. Since its establishment in 1942, Africa Diatomite Industries Limited

(ADIL) has been exploiting diatomite in Gilgil. ADIL has access to good
quality diatomite deposits estimated at over 6 million tons and currently
boasts having the only known viable quality deposits of Diatomite in
Kenya.
Key Companies in Exploration and Mining
Kenya has sizeable deposits of titanium ores, Gold, Flourspar, Diatomite,
Soda Ash, and gemstones. The key companies exploring and exploiting
these resources include;
i)

Base Titanium;

ii)

Acacia Mining;

iii)

Kenya Fluorspar;

iv)

Red Rock Resources;

v)

African Diatomite Industries;

vi)

Tata Chemicals Magadi;

vii)

Karebe Gold Mines;

viii) Kilimapesa Gold Mines; and

ix)

Several Gemstone Dealers.

Contribution of Mining to Kenyas GDP

Currently, the sector contributes to around 0.8% of Kenya GDP, provides
employment to around 13,000 Kenyans and contributes to around Kshs.
1.35 Billion to Government revenue having raised it from a paltry Kshs. 21
Million before the creation of the Ministry.

C. REFORMS IN THE MINING SECTOR

1. Mining Bill 2015
Drafting and finalisation of the Mining Bill 2014, which has passed through
mediation committee of Parliament and await passing by the National

Assembly and the Senate. To achieve this outcome, the Ministry carried
out the following activities:
i) Drafting the document using international benchmarks of leading
mining jurisdictions; and
ii) Engagement with stakeholders in the development of the Mining
Bill including the Kenya Chamber of Mines.
iii) Engagement

with

and

presentations

to

the

Parliamentary

Committee on Environment and Natural Resources and the

Senate Committee on Land and Natural Resources.
iv) Harmonisation between the Mining Bill and other extractives
sector related bills which impacted on the Mining Bill. These
include:
a) National Energy and Petroleum Policy, 2015;
b) Petroleum (Exploration, Development and Production) Bill, 2015;
c) Energy Bill, 2015;
d) Model Petroleum Agreement; and
e) Natural Resources (Classes of Transactions Subject to
Ratification), Bill, 2015.
v) The Mining Bill includes international best practices that are likely
to greatly enhance transparency and consequently appetite for
investment. Significant changes include:
a) Mining companies can apply for mining concessions online;
b) Removal of widespread discretionary powers from the
Commissioner of Mines;
c) Publication

of

mineral

agreements

and

disclosure

of

payments received by the Government;

d) Revenue sharing the new fiscal regime clearly spells out how
revenue will be shared - 10% to communities, 20% to the
counties and 70% to national government;

e) Community Development Agreements (CDAs): The new law

will require investors/holders of mining licenses to negotiate
and enter into CDAs; and
f) Legalisation of artisanal mining: This will create employment,
stop smuggling of minerals, increase taxing avenues for the
government, increase revenue and reduce destruction of the
environment.
2. Mining Regulations
Developing regulations necessary for implementation of the Mining Bill
once enacted. These have also been developed using international
benchmarks and are awaiting stakeholder consultation. The Regulations
that have been developed include:
The 16 regulations already developed are;
i)

Mining (Licensing and Permitting) Regulation;

ii)

Mining (Employment and Training) Regulation;

iii)

Strategic Minerals Regulation;

iv) Mine Health and Safety Regulation;

v)

Mining (Use of Assets) Regulation;

vi) Dealings in Minerals Regulation;

vii) Mineral Agreements Regulation;
viii) Mining (State Participation) Regulations;
ix)

Reporting on Mining and Mineral Related Activities Regulation;

x)

The Mining Award (Award of Mineral Rights by Tender)

Regulation;

xi)

The National Mining Corporation Regulation;

xii) The Guideline for Work Programmes and Exploration Reports

Regulation;
xiii) Community Development Agreement Regulation;
xiv) Mine Support Services Regulation;

xv) Mining (Use of Local Goods and Services) Regulation; and

xvi) Royalties.
3. Mining Policy
Furthering its mandate to develop a policy on mining and in recognition of
the need for a policy to guide implementation of the Mining Bill once
enacted, the Ministry consulted stakeholders and drafted a Mining and
Minerals Policy. The document was forwarded to cabinet for approval
and is awaiting discussion.
4. Online Transactional Mining Cadastre Portal (OTMCP).
In

order

to

enhance

transparency

in

licencing

and

concession

management and in recognition of the critical role that IT plays in the

current circumstances, the Ministry adopted an online based Mineral Titles
and concession management system. This system allows the Ministry to:
i)

View licence or permit details and application status in real time;

ii)

Submit and manage electronically the applications for granting,

renewals and other business processes;

iii) Submit digital documents to meet reporting requirements; and

iv) Submit fee payments via credit card or mobile money.
The cadastre has led to more clarity in licencing and led to an increase in
the number of compliant companies. It ensures that cases of overlaps and
boundary disputes between mineral right holders are minimised while at
the same time promoting efficiency in rights allocation.

5. Investment promotion
Recognising the need to promote Kenya as a mining jurisdiction, the
Ministry took a number of measures as enumerated hereunder;
i)

Drafting and publishing a mining Investment handbook and

guidelines

ii)

Participating in annual mining investment conferences in South

Africa

(Mining

Indaba

Conference

February),

United

Kingdom(Mining on Top Africa Summit - June), Australia (Africa

Down Under Conference - September), Canada (Prospectors and
Developers Association of Canada Symposium - March) and Kenya
Mining and Energy Investment Conference - October.
6. Geological Data Bank
In a bid to ensure that geological data is coherently stored, easily
retrieved, managed and digitally stored, the Ministry developed a strategy
for the establishment of a geological data bank. Through support from
the

British

Geological

Survey,

the

Ministry

has

developed

an

implementation report for this project of national importance and the

report is awaiting implementation.
7. Mineral Certification Laboratory
Recognising the critical role played by mineral laboratory in exploratory
and mineral marketing, the Ministry instituted steps towards revamping the
existing Mineral certification laboratory at Madini House through a
comprehensive review of its current equipment, process and an
integrated software for efficient performance of its key functions. Towards
this end, the Ministry contracted Deloitte to conduct a comprehensive
analysis of the existing lab, draw up recommendations for its revamping
and propose alternative operational frameworks for the lab. The report is
ready and is currently being interrogated by Ministry staff with a view of
implementing its recommendations.
8. Africa Mining Development Centre (AMDC)
The Africa Mining Development Centre is a pan-African body established
by the African Union with a clear mandate of assisting member countries
in formulation policies and programs around mining that are beneficial to

the countries. This followed the adoption of the African Mining Vision in
2008 by the AU Ministers for Mineral Resources Development and
subsequent ratification by the Heads of States Summit in 2008.
The Ministry submitted a bid for hosting the AMDC in Nairobi. In support of
this initiative, the Cabinet Secretary for Mining, with the concurrence of
the Cabinet Secretary to the National Treasury submitted a Cabinet
memorandum for adoption by Cabinet. This Memo is awaiting Cabinet
discussion.
Additionally, the Ministry has instituted steps towards domestication of the
African Mining Vision as envisaged by the African Union. Towards this end,
the Ministry is partnering with UNDP Kenya and other Government and civil
society organisations in preparations for the domestication process and
adoption of a Country mining vision.
9. Kenya Minerals Audit Unit
Through support from the Canadian Government, the ministry has
embarked on the conceptualization of a framework for unlocking the
optimisation of revenue from the minerals wealth in Kenya through
establishing and operationalization of a Mineral Audit Capability and unit.
The report of assessment and framework is completed.
This unit is aimed at ensuring that maximum payable government revenue
is received from mining operators while at the same time ensure
10. South and East Africa Mining Centre (SEAMIC)
This is a Member state regional body hosted by the Republic of Tanzania
and offering member states services in laboratory, Gemmology Training
and other minerals related services. Kenyas Cabinet Secretary for Mining
assumed Chairmanship of the body in June 2013 for two terms up to June
2015.

11. Geological Equipment

In a bid to enhance the performance of the Geological Surveys and in
recognition of new technologies and approaches to exploration, the
Ministry has revamped the survey through acquisition of modern
equipment and tools.
D. DIRECTORATE OF RESOURCE SURVEYS AND REMOTE SENSING (DRSRS)
The DRSRS has the mission of generating and promoting application of data
and information on natural resources support for sustainable development
and the mandate of the collection, storage, analysis, updating and
dissemination of geo-spatial information on the environment and natural
resources to facilitate informed decision-making for sustainable management
of these resources with the major aim of alleviating poverty and
environmental management. The data collected by the DRSRS informs the
formulation of strategies, policies and legislation for decision-making in
various government ministries departments and agencies (MDA) in various
sectors.
Projects and Programmes: Achievements and Status
i) Rangeland Resource Assessment, Mapping and Monitoring (Livestock
and Wildlife) for Planning, Conservation and Management
ii) Land use/cover Assessment and Mapping for Planning, Conservation,
and sustainable development
iii) Early Warning System for Food Security Planning and Management and
Disaster Risk Reduction Planning and Management
iv) ICT and Infrastructure Development for Natural Resources Geo-spatial
Database
v) Policy, Legal and Institutional Framework for Environmental
Governance

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E. OUTSTANDING ISSUES
1. Base Titanium Royalty Negotiation
The Ministry entered into negotiations with base Titanium Limited in relation
to increasing their royalty payments to government for their Kwale Mineral
Sands project.
The talks began in February 2014 and envisaged to be complete within
one month. However, the same has remained outstanding.
The Ministry had expected that a meeting scheduled for 14th December
between

the

Companies

Top

management

and

Government

representatives would have solved the issues.

2. Cortec Mining ICSID Arbitration case
Then Commissioner of Mines and Geology issued Cortec Mining Kenya
Limited (CMK) with a Special Mining Lease (SL) No. 351 on 7th March2013.
Until then CMK was operating on a Special Prospecting Licence No. 256.
The Cabinet Secretary for Mining suspended CMK SL On 5th August 2013
amongst 43 other after the Jubilee Government came into power and
upon information that there were illegal issuance of licences during the
transition to the new government. CMK went to court on 9th September
2013 seeking a Judicial Review of the Cabinet Secretarys decision of
suspension and revoking SL351 and order of prohibition against the
Minister. During the case, the National Environment Management
Authority (NEMA), BASU Mining Limited, Kenya Forest, Service (KFS),
National Museum of Kenya (NMK), County Government of Kwale and
three individuals Kenyans Enjoined themselves as interested parties to
oppose the application by CMK.
In March 2015, the court ruled in favour of the Ministry thus cementing the
Ministrys decision to withdraw CMKs Licence.

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Later, Cortec moved to the Court of appeal and at the same time
resulted to the International Centre for Settlement of Investment disputes
relying on UK and Northern Island and Kenya Bilateral Investment Treaty.
The Arbitration proceedings are ongoing with the republic of Kenya being
represented by the firm of DLA Piper in collaboration with IKM Advocates,
Kenya.
3. Mining Bill Enactment
Upon its passing by the National Assembly, the Bill was forwarded to the
Senate for its concurrence. Senate made some changes that were not
acceptable to the National Assembly hence resulting in the appointment
of a mediation committee comprising of members from both house. The
process is ongoing and expected to be concluded soon.

4. Mining Regulations Stakeholder presentations

In preparation for enactment of the Mining Bill 2015, the Ministry with the
assistance of DFID through ASI has drafted all regulations that will aid in
implementation of the Mining Bill. The next process will involve stakeholder
engagements as envisioned in the Statutory Instruments Act 2012.
5. Airborne Geophysical Survey
Recognizing the need to conduct an integrated Nationwide Airborne
Geophysical Survey in order to identify areas of potential mineralization,
the Ministry entered into a Memorandum of Understanding with the
Geological Exploration technology institute of China in August 2013. This
MoU spelt out the modalities of this survey and envisioned funding support
from the Chinese Government through the China EXIM Bank.

12

The Ministry in collaboration with the National Treasury applied for a

concessionary Loan of USD 67 Million in May 2014. Very little progress has
so far been made despite numerous assurances from the Chinese
Embassy in Kenya that the loan was under consideration by EXIM.

6. The 20 Year mining strategy

The Ministry is in the process of developing a comprehensive 20-year
mining strategy for the sector. Through funding from the UKs Department
for International Development (DFID), the Ministry engaged McKinsey
International in this venture whose Phase one entails a Kenya Mining
sector Diagnostic.
The Diagnostic has been presented to the Ministry and there is urgent
need for the Ministry to seek additional funding for development of the
indepth implementation plan arising from the Diagnostic.
7. Gemstone Cutting Centre
In order to enhance revenues accruing from the export of gemstones
and in recognition of the significant increase in value as a result of Gem
cutting and polishing, the Ministry mooted the Gemstone Cutting and
Marketing Centre at Voi. The Project received funding during the 20114/15
Financial year and is ongoing. It requires additional funding to complete
the building and purchase of the necessary equipment. There is also the
need for capacity building .
F. CHALLENGES FACING KENYAS MINING SECTOR
i) Under-Exploration
Research has shown that there is insufficient exploration in Kenya. Only 4%
of the total landmass of Kenya is under exploration licences. Most of these
licences are also dormant and unlikely to result into mining.

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Exploration expenditure is also very low (estimated at around USD31/KM2

compared to USD102/KM2 in Tanzania).
ii) Geological Data
Lack of Geological datasets
iii) Energy Costs
Mining is perhaps one of the sector requiring huge energy inputs across
the entire value chain. With incresed costs of power and the unstable
supply of the same, this has hampered growth of some industries such as
Glass Manufacturing despite abundant availability of raw material (Soda
Ash, Silica sand etc).
iv) Transport and other infrastructure
Minerals are often time found/discovered in far flung remote areas. With
limited infrastructural provisions, the costs of running sustainable, profitable
mines or exploration ventures is highly hampered by increased costs of
providing these infrastructures.
The case in point is Fluorspar mining in Kerio Valley which due to lack of
reliable rail transport services has to rely on road haulage upto the port of
Mombasa. This increases the costs hence reducing Kenyas Fluorspar
competitiveness in the international market.
v) Social and community expectations
Lack of coherent policies of how to deal with issues such as relocation has
resulted in social issues being experienced with some exploration sites.
Community expectation around mining if not well managed may result in
increased
vi) Artisanal and small scale miners
Highly un-mechanised and health and environment risks. Use of banned
chemicals

(Cyanide

and

mercury).

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Informal

markets

leading

to

exceptionally low prices and smuggling resulting to huge loss of

Government revenue

Najib M Balala
OUTGOING CABINET SECRETARY FOR MINING
rd

3 February 2016

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